sraa016 GR No. L-4oatt
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ARELLANO LAW FOVNDATION
PHILIPPINE LAWS AND JURISPRUDENCE DATABANK
Republic of the Philippines
‘SUPREME COURT
Manila
EN BANC
G.R, No, L-404tt August 7, 1935,
DAVAO SAW MILL CO., INC., plaintif-appellant,
APRONIANO G. CASTILLO and DAVAO LIGHT & POWER CO., INC., defendants-appellees,
Arsenio Suazo and Jose L. Palma Gil and Pablo Lorenzo and Delfin Joven for appellant.
J.W. Ferrier for appellees.
MALCOLM, J:
‘The issue in this case, as announced in the opening sentence of the decision in the trial court and as set forth by
counsel for the parties on appeal, involves the determination of the nature of the properties described in the
complaint. The trial judge found that those properties were personal in nature, and as a consequence absolved
the defendants from the complaint, with costs against the plaintit.
‘The Davao Saw Mil Co., Inc., is the holder of a lumber concession from the Government of the Philippine Islands.
It has operated a sawmill in the sitio of Maa, barrio of Tigatu, municipality of Davao, Province of Davao. However,
the land upon which the business was conducted belonged to another person. On the land the sawmill company
erected a building which housed the machinery used by it. Some of the implements thus used were clearly
personal property, the conflict concerning machines which were placed and mounted on foundations of cement, In
the contract of lease between the sawmill company and the owner of the land there appeared the following
provision:
That on the expiration of the period agreed upon, all the improvements and buildings introduced and
erected by the party of the second part shall pass fo the exclusive ownership of the party of the first part
without any obligation on its part to pay any amount for said improvements and buildings; also, in the event
the party of the second part should leave or abandon the land leased before the time herein stipulated, the
improvements and buildings shall likewise pass to the ownership of the party of the first part as though the
time agreed upon had expired: Provided, however, That the machineries and accessories are not included
in the improvements which will pass to the party of the first part on the expiration or abandonment of the
land leased
In another action, wherein the Davao Light & Power Co., Inc., was the plaintiff and the Davao, Saw, Mill Co., Inc.,
was the defendant, a judgment was rendered in favor of the plaintiff in that action against the defendant in that
action; a writ of execution issued thereon, and the properties now in question were levied upon as personalty by
the sheriff, No third party claim was filed for such properties at the time of the sales thereof as is borne out by the
record made by the plaintiff herein. Indeed the bidder, which was the plaintiff in that action, and the defendant
herein having consummated the sale, proceeded to take possession of the machinery and other propertios
described in the corresponding certificates of sale executed in its favor by the sheriff of Davao.
‘As connecting up with the facts, it should further be explained that the Davao Saw Mil Co., Inc., has on a number
of occasions treated the machinery as personal property by executing chattel mortgages in favor of third persons.
One of such persons is the appellee by assignment from the original mortgages,
Anticle 334, paragraphs 1 and 5, of the Civil Code, is in point. According to the Code, real property consists of —
1. Land, buildings, roads and constructions of all kinds adhering to the soit
5. Machinery, liquid containers, instruments or implements intended by the owner of any building or land for
use in connection with any industry or trade being carried on therein and which are expressly adapted to
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meet the requirements of such trade of industry.
Appellant emphasizes the first paragraph, and appellees the last mentioned paragraph. We entertain no doubt
that the trial judge and appellees are right in their appreciation of the legal doctrines flowing from the facts.
In the first place, it must again be pointed out that the appellant should have registered its protest before or at the
time of the sale of this property. It must further be pointed out that while not conclusive, the characterization of the
property as chattels by the appellant is indicative of intention and impresses upon the property the character
determined by the parties. In this connection the decision of this court in the case of Standard Oil Co. of New York
vs. Jaramillo ( [1923], 44 Phil., 630), whether obiter dicta or not, furnishes the key to such a situation.
It is, however not necessary to spend overly must time in the resolution of this appeal on side issues. It is
machinery which is involved; moreover, machinery not intended by the owner of any building or land for use in
connection therewith, but intended by'a lessee for use in a building erected on the land by the latter to be
returned to the lessee on the expiration or abandonment of the lease,
A similar question arose in Puerto Rico, and on appeal being taken to the United States Supreme Court, it was
held that machinery which is movable in its nature only becomes immobilized when placed in a plant by the owner
of the property or plant, but not when so placed by a tenant, a usufructuary, or any person having only a
temporary right, unless such person acted as the agent of the owner. In the opinion written by Chief Justice
White, whose knowledge of the Civil Law is well known, it was in part said:
To determine this question involves fixing the nature and character of the property from the point of view of
the rights of Valdes and its nature and character from the point of view of Nevers & Callaghan as a
judgment creditor of the Altagracia Company and the rights derived by them from the execution levied on
the machinery placed by the corporation in the plant. Following the Cade Napoleon, the Porto Rican Code
treats as immovable (real) property, not only land and buildings, but also attributes immovabllty in some
cases to properly of a movable nature, that is, personal property, because of the destination to which itis
applied, “Things,” says section 334 of the Porto Rican Code, "may be immovable either by their own nature
or by their destination or the object to which they are applicable." Numerous ilustrations are given in the
fifth subdivision of section 335, which is as follows: "Machinery, vessels, instruments or implements
intended by the owner of the tenements for the industrial or works that they may carry on in any building or
upon any land and which tend directly to mest the needs of the said industry or works." (See also Code
Nap., articles 516, 518 ef seq. to and inclusive of article §34, recapitulating the things which, though in
themselves movable, may be immobilized.) So far as the subject-matter with which we are dealing —
machinery placed in the plant — it is plain, both under the provisions of the Porto Rican Law and of the
Code Napoleon, that machinery which is movable in its nature only becomes immobilized when placed in a
plant by the owner of the property or plant. Such result would not be accomplished, therefore, by the
placing of machinery in a plant by a tenant or a usufructuary or any person having only a temporary right.
(Demolombe, Tit. 9, No. 203; Aubry et Rau, Tit. 2, p. 12, Section 164; Laurent, Tit. 5, No, 447; and
decisions quoted in Fuzier-Herman ed. Code Napoleon under articles 522 et seq.) The distinction rests, as
pointed out by Demolombe, upon the fact that one only having a temporary right to the possession or
‘enjoyment of property is not presumed by the law to have applied movable property belonging to him so as
to deprive him of it by causing it by an act of immobilization to become the property of another. It follows
that abstractly speaking the machinery put by the Altagracia Company in the plant belonging to Sanchez
did not lose its character of movable property and become immovable by destination. But in the concrete
immobilization took place because of the express provisions of the lease under which the Altagracia held,
since the lease in substance required the putting in of improved machinery, deprived the tenant of any right
to charge against the lessor the cost such machinery, and it was expressly stipulated that the machinery so
put in should become a part of the plant belonging to the owner without compensation to the lessee. Under
such conditions the tenant in putting in the machinery was acting but as the agent of the owner in
‘compliance with the obligations resting upon him, and the immobilization of the machinery which resulted
arose in legal effect from the act of the owner in giving by contract a permanent destination to the
machinery.
‘The machinery levied upon by Nevers & Callaghan, that is, that which was placed in the plant by the
Altagracia Company, being, as regards Nevers & Callaghan, movable property, it follows that they had the
right to levy on it under the execution upon the judgment in their favor, and the exercise of that right did nat
in a legal sense conflict with the claim of Valdes, since as to him the property was a part of the realty which,
as the result of his obligations under the lease, he could not, for the purpose of collecting his debt, proceed
separately against, (Valdes vs, Central Altagracia [192], 225 U.S., 58.)
Finding no reversible error in the record, the judgment appealed from will be affirmed, the costs of this instance to
be paid by the appellant.
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Villa-Real, Imperial, Butte, and Goddard, Jv., concur.
GR No. L-4oatt
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